Low-Cost Divorce

By Michelle Lodge http://blogs.barrons.com 02/26/2013

When wealthy couples divorce, minds may run to contentious drawn-out affairs that dominate headlines and command hefty fees and settlements. A perfect example is that of basketball star Kobe Bryant and his wife, Vanessa, who announced in January, after months of negative press, that their divorce was now off.

It doesn’t have to be so. Many wealthy couples opt for quicker, quieter, cheaper, out-of-court divorces that protect their assets; afford them more control over the process and outcome; allow for more creative, tailor-made solutions; and cost much less than what a court settlement would wind up costing.

In New York City, for instance, a divorce with a trial could result in a six-figure price tag, whereas one handled by a mediator could run, including court filing fees, just four figures, claims Adam Berner, a practicing lawyer and mediator in both New York State and New Jersey. Generally, fees are market-driven, with professionals in large urban centers commanding the highest.

For one couple who are in the process of splitting up after 20 years of marriage, mediation is the best option, agrees attorney Katherine E. Stoner, of Pacific Grove, Calif., and the author ofDivorce Without Court: A Guide to Mediation and Collaborative Divorce (Nolo). In this case, both husband and wife have common goals, including keeping their divorce out of the local gossip mill in the community where they are both active.

The family is worth more than $10 million, most of which comes from a nationally known, privately-held business. All of their three children are over 18, with two still in college, and one working in the family business. During their marriage, the husband built the company, while the wife was a homemaker. The two want to negotiate an equitable agreement that pays for their younger children’s college education, compensates the wife for the increase in the business’ value during their marriage and also supports her on an ongoing basis.

A mediator, who may or may not be a lawyer or could be a retired judge, works with the couple privately to hammer out details, then files the necessary paperwork to dissolve the marriage. Depending on the state, the particulars of the dissolution may be sealed, only accessible to them and their counsel. If the records are by law public, the couple can petition the court to keep them private.

As a general rule, pre-nuptial agreements, when uncontested, are durable and speed up proceedings, but many of them do not address offspring. So that’s one area that must be worked out during mediation.

Randall M. Kessler, a lawyer in Atlanta who has chaired the American Bar Association’s family law committee and its counterpart for the Georgia bar organization, says using mediation has an added benefit. “If a wife is able to say, for example ­­­– ‘he’s a jerk, he cheated on me’ – to a neutral third party, perhaps for the first time, she believes she has been heard and is ready to move on,” says Kessler.

Another option is to hire a private judge, which usually means a retired judge or a practicing lawyer. The couple can select a professional with a sophisticated knowledge of business, experience negotiating high-net-worth cases and who works according to the couple’s timeline.

By contrast, going through the courts can mean that the couple’s trial is rushed and the schedule inconvenient for them, a judge may not have the background to deal with stocks, shares, valuations, partnerships and any number of complex business arrangements.

The range of fees is determined by the location, with experienced private judges and arbitrators in big cities like New York, Los Angeles and Chicago commanding $750 and up per hour; in smaller cities the range is around $500 to $600 an hour and in towns, about $300 to $400 hourly.

Some couples choose an arbitrator, which is best for families without children, but also offers a speedy, inexpensive resolution. One drawback is that the arbitrator’s decision is binding. If either party is unhappy with the outcome, his or her only option for overturning the decision is to prove the arbitrator’s misconduct.

Another growing area for divorce is collaborative law, which is especially fruitful for couples with children. It’s private and comprehensive. Before beginning the process, the couple must sign a participation agreement that they will not go to court. However, although collaborative law is cheaper than a court case, it can be much more expensive than either mediation or arbitration. The spouses use their own lawyers, and the “divorce” team can also include a financial adviser, a mental-health professional and an accountant or other adviser who evaluates the current and long-term value of any assets. Evaluating the estate, figuring out its intrinsic value versus today’s price if it were sold, usually costs more than lawyers’ fees, and it depends on the wealthy spouse being straight and not trying to hide or low-ball assets from the cash-poor spouse.

Starting out with a more modest assessment of assets isn’t unusual, says family-court judge Michele Lowrance , in Cook County, Illinois, but concealing part of the estate may backfire on the spouse who’s doing it. “That could constitute fraud and it can ruin their credibility in court, or a judgment can be vacated (thrown out) if the value is falsified,” she adds. “Usually the parties get independent evaluators or each party gets their own and they have a duel of evaluators.”

But being straight and taking this low-cost, mediated route can wind up saving you and your estate a lot of money over a bitter, contested divorce fought through the courts. As Kessler says, “When you divorce, don’t give money to divorce lawyers: Keep it for yourselves.”

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